purchace home with 401k

[Anonymous]

can i use my 401k to purchase a 1st time home

[Lel]

You might be able to take a loan from your 401(k) plan to pay for some of the costs associated with the purchase of your first home, but you would have to pay yourself back.  The availability of 401(k) loans varies by plan, and may affect any matching from your employer.  Check with your plan administrator.

With regard to early distributions, you can't take money out of your 401(k) for your first home purchase without being subject to an additional 10% penalty that is added to the taxes that would already apply.

From the IRS's FAQ:

Question:   Can I withdraw my elective contributions to a 401(k) plan penalty free to build or purchase my first home?

Answer:     Elective contributions to a 401(k) plan are subject to certain distribution restrictions.  See Publication 560, Publication 575 and Tax Topic 424. Generally, the exception for using retirement funds to build or purchase your first home does not apply to a distribution of your elective contributions from a 401(k) plan. If you are under the age of 59 1/2, a distribution (including a distribution of employer matching and profit sharing contributions) from your 401(k) plan subject to a 10% additional tax on early distributions.  This 10% additional tax is in addition to other taxes that apply to the distribution. However, a 401(k) plan may permit loans and hardship distributions.  Depending on the terms of your 401(k) plan, you may be able to receive a loan or hardship distribution to build or purchase your first home. Your plan administrator or employer should have written information about your particular plan (including the availability of loans or hardship distributions and applicable requirements) as well as other plan rules.

If you have a Roth IRA, you can withdraw up to $10,000 penalty-free for the purchase of your first home.  I think that's the amount, at least that's what it was for us about 3.5 years ago.  But I think my accountant said that you can withdraw your contributions (not accumulations/capital gains) at any time without penalty, but I don't know for certain that I understood what he was saying.

[DallasLoanGuy]

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@Anonymous wrote:
can i use my 401k to purchase a 1st time home

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please clarify.

are you talking about accessing the 401k for down payment and closing costs?

[Anonymous]

yes, i'm wanting to access my 401k for down payment and closing costs.

[DallasLoanGuy]

yes, of course.

[Anonymous]

can i take the total sum out with out penalties, and with out needing to pay it back.

[rockymtngrl]

You would have to talk with your plan administrator about that, I think they are all different. You can call them up and talk with them and they will tell you exactly what you can do and what you will have to pay. You may be able to do a hardship withdrawl for a down payment but there will be taxes. The best thing to do is take a loan and pay it back.

[Lel]

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charliebrown007 wrote:
can i take the total sum out with out penalties, and with out needing to pay it back.

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Are you at least 59.5 years old?

If not, then unless there's some other exception, then you'll have to pay income tax plus the 10% additional penalty on your distribution.  If you take this option, then you would not have to pay it back.   You need to check with your plan administrator to see whether this option is available to you.

If your 401(k) is eligible for rollover, you can convert it to a Rollover IRA and then take a lump-sum distribution.  You would still have to pay income tax, but I believe that the 10% penalty does not apply if you use the distribution to pay for your home.  Check with your plan adminstrator to see if some or all of your 401(k) is rollover-eligible.

The bottom line here is that you should talk directly with your 401(k) plan administrator to see what options you have.  Different plans have different rules, and there could be farther-reaching consequences of your actions.  For example, with my current 401(k) plan, if I take out a hardship withdrawal, I cannot make contributions to my plan for 6 months.  During this time, I lose out on all matching funds from my employer, even the automatic contribution that everyone gets even if they don't put any of their own money into the 401(k).

[Anonymous]

If its a roth you can withdrawal money as long as you are a buying a home and the account has been opened for 5 or more years. Don't need to be 59.5 .

[DallasLoanGuy]

likely have to borrow against it.

can pay it back with interest or lump sum with tax credit.